Public Announcements

 

Social Security Wage Base Increases to $127,200 for 2017

American Payroll Association - Compliance Update

Social Security Wage Base Increases to $127,200 for 2017 The Social Security Administration (SSA) announced on Tuesday, October 18, 2016, that the 2017 social security wage base will be $127,200, which is an increase of $8,700 from $118,500 in 2016 (view the SSA Fact Sheet). As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. As in 2016, wages paid in excess of $200,000 in 2017 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees' wages. Employers will not pay the extra tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2017 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2017 is $7,886.40, an increase of $539.40 from $7,347 in 2016.

The social security wage base for self-employed individuals in 2017 will also be $127,200. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base. In 2017, the maximum social security tax for a self-employed individual will be $15,772.80.

FICA coverage threshold for domestic, election workers The threshold for coverage under social security and Medicare for domestic employees (i.e., the "Nanny tax") will be $2,000 in 2017, unchanged from 2016; the coverage threshold for election workers will be $1,800 in 2017, up from $1,700 in 2016.

 

2016 Federal Percentage Method Income Tax Withholding Tables Released

The Internal Revenue Service (IRS), on Tuesday, December 8, 2015, released Notice 1036, Early Release Copies of the 2016 Percentage Method Tables for Income Tax Withholding. The Notice is available at www.americanpayroll.org/members/Forms-Pubs/#pubs. The tables included in Notice 1036, along with the 2016 wage-bracket withholding tables, will appear in IRS Publication 15, (Circular E), Employer's Tax Guide, which will be published at a later date.

The withholding allowance amounts by payroll period have changed. For 2016 they are:

?

Payroll Period

?

One Withholding Allowance

?
?

Weekly

?

$??????77.90

?
?

Biweekly

?

155.80

?
?

Semimonthly

?

168.80

?
?

Monthly

?

337.50

?
?

Quarterly

?

1,012.50

?
?

Semiannually

?

2,025.00

?
?

Annually

?

4,050.00

?
?

Daily or Miscellaneous
(each day of the payroll period)

?

15.60

?
? ? ? ? ?

Note: When using the percentage method of withholding, the tax for the pay period may be rounded to the nearest dollar. If rounding is used, it must be used consistently.

Withholding adjustment for nonresident aliens
???????Also updated for 2016 are the amounts that employers should add to the wages paid to nonresident alien employees who perform services in the United States.

Rates for withholding on supplemental wages for 2016
???????There is a two-tiered system for withholding income tax from supplemental wages at a flat rate:

    • Optional flat rate: 25% for supplemental wages up to and including $1 million (no other percentage allowed), and

 

    • Mandatory flat rate: 39.6% for supplemental wages over $1 million.

 

2016 Rate for backup withholding
Payers of reportable payments generally must backup withhold 28% for federal income tax if the payee fails to provide a correct Taxpayer Identification Number (TIN).